Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

The Commerce Clause and you: How provision affects consumers

- by Alan Duvall 

Published in Dayton Daily News May 28, 2006 

Congress shall have Power to regulate Commerce with foreign Nations, and among the several States... - U.S. Constitution, Article1, Section 8

The US Constitutional provision referred to as the Commerce Clause is brief in words yet powerful in potential impact to the perpetual struggle between the rights of states versus federal government.  The clause is as noteworthy for what it does not say as its actual limited contents.   

Since Congress is granted power to regulate interstate commerce, courts conclude by negative reference States cannot enact any laws that discourage interstate commerce by discriminating against citizens and businesses of other states in favor of their own residents.  

Two recent landmark cases highlight how the controversial Commerce Clause impacts our own local economy and lifestyle. 

In Granholm v. Heald, the Court ruled unconstitutional New York and Michigan laws that unfairly restricted out-of-state winery sales.  Such laws, similar to Ohio, allowed in-state vintners direct access to in-state citizens, yet forced out-of-state wineries to sell only through local distributors. 

The ruling simply mandates equal treatment for all wine producers.  Hereafter, non-compliant states must either regulate all vintners or none in like fashion.  Until they react, it’s an open festival for interstate wine sellers. 

Ohio commanded center stage in Cuno v. DaimlerChrysler, wherein a unanimous Supreme Court traversed an intellectually curious route of logic to uphold an Ohio tax statute.  The Court ruled taxpayer plaintiffs lacked standing to sue the State and dismissed the case.    

Ohio had bestowed upon DaimlerChrysler $280 million tax incentives to build a $1.2 billion assembly plant in Toledo to employ thousands of workers.  Such tax incentives are common among States actively seeking to attract and retain businesses. 

A lower Court had initially ruled the tax incentives unconstitutional.  Exhibiting clever sleight-of-hand abilities, Ohio reacted changing the tax credits to tax “grants” – same calculation.  Such magic is now superfluous in light of the Supreme Court ruling in favor of the original law. 

Lessons learned?  The Commerce Clause in effect creates a free-trade zone among the 50 states.  Meanwhile states can compete among themselves offering tax incentives like candy to any business deemed worthy of consideration.  Clear as mud. 

And until Ohio figures out how to react to the wine regulation conundrum, citizens can legally order wine directly from internet vendors.  A toast to the Supreme Court!

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.